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Fed in the Headlines

The Federal Reserve has wrapped up 2018 with a key interest rate hike. Rates on credit cards, adjustable-rate mortgages, home equity lines of credit and some student loans will rise, increasing borrowers’ monthly payments. All have variable rates that directly respond to the Fed’s move.

NLC’s clients should know that credit card rates are generally tied to the prime rate and will see a higher credit card rate within one to two billing cycles. Average credit-card rates are 17.6 percent, if you pay your balance off every month, are our Personal Mortgage Advisors suggest, you avoid interest charges altogether. If you’re staring at hefty outstanding balances, consider consolidating those into a lower, fixed-rate personal loan or transfer to another credit card offering a 0-percent rate for an introductory period.

If you’ve tapped your home equity, it’ll be more expensive to pay back. Ask your NLC Advisor about some of our great fixed-rate mortgage options. The average 30-year fixed mortgage rate has already climbed from about 4 percent in early January to 4.63 percent, largely because investors expect federal tax cuts and spending increases – along with a healthy economy – to push inflation higher. For homebuyers, any impact on the monthly bill would probably be relatively small. A quarter-point rate increase on a $200,000 mortgage would boost the monthly payment by about $30. We can run the numbers for you.

Although NLC doesn’t do auto lending, monthly payments on a new auto loan also could edge higher, though many buyers might not feel it because of auto dealer incentives. NLC Advisors tell their clients to look for deals. Auto manufacturers frequently offer discounted financing to encourage car sales, and banks and other lenders compete with those rates.

Many private student loans come with variable interest rates that follow the prime rate. When the loan rate adjusts depends on what’s written in your loan terms. For instance, your monthly payment will increase for those on a regular payback schedule. But if you’re on an income-repayment plan, your monthly payment won’t change, but a bigger portion will go toward interest rather than principal. Federal student loans have a fixed interest rate set by Congress and are not affected by the Fed’s move.

Regardless of whether or not the U.S. Government is open, NLC is continuing to offer all programs to our valued clients. Just ask!

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